The island’s legislature tried to design its own restructuring process [PDF], which would have allowed public services to continue uninterrupted while it negotiated lower debt payments, but the U. Supreme Court rejected the law. Congress and President Barack Obama’s administration drew up an alternative plan, the 2016 Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). Most notably, PROMESA created a seven-member financial oversight board appointed by the White House that was granted full control of Puerto Rico’s finances.

It also created a debt restructuring process similar to Chapter 9 that governed negotiations with creditors to reduce debt payments. Those negotiations were beset by controversy, as it became clear that all involved—bondholders, Puerto Rican pension funds, and other public services—faced steep losses. Several versions of a sweeping plan to cut the island’s debt were floated, but creditors promised legal challenges, and efforts were paused due to the COVID-19 pandemic. In January 2022, a federal judge approved a final plan between the PROMESA board and Puerto Rico’s government, paving the way for the island to escape bankruptcy and resume making payments to creditors.